The technology selection aims at identifying the critical technologies which the
enterprise should concentrate its interest on, and thus prioritize its
investments.

On the basis of the analysis, the importance-strength matrix can be constructed.

The rows of the matrix show the critical technologies identified above.

The columns show a scale from 1 to 5 where the strength in each technology is
reported. This mirrors the evaluation of the enterprise's capability in that
technology given in the previous step.

In
the matrix, the current and desired position of each critical technology is
assessed. This provides the basis for formulating the technology strategy, i.e.
identifying the effort needed to achieve the desired competitive position. To
this end, the technology capability assessment also allows identification of the
areas in which a certain technology needs to be improved (equipment, human
resources and level of expenses).

The importance-strength matrix also reveals whether a technological leadership
strategy (being first on the market, developing new technologies, keeping a
position on the leading edge) or a follower strategy (imitate leaders, bring new
products on the market later) should be adopted. If in the most important
technologies the enterprise appears to be weaker than competitors, a leadership
strategy is not viable. However, as the enterprise accumulates resources in a
certain technological area and covers the gap with competitors, the situation
may change.

Since this is the key matrix according to which decisions are taken, it should
be constructed and used by top management with the support of the enterprise's
technical managers.

TABLE 4. Importance/strength matrix

Critical technologies

Strength scale (1-5)

1

2

3

4

5

The output of this stage is the list
of priorities in technological actions.

R&D&E projects (research, development and engineering related to product and
process). Process should be understood in a broad sense, involving the
production chain as a whole and not only manufacturing. Raw materials and
components development, suppliers development and customer services should
be included.

This guide shows how this can be carried out for R&D&E projects. Additional
comments are made at the end of each topic in terms of adjustments needed to
apply the concepts to investment projects.

The definition of a technology R&D project portfolio has three phases: list of
the technological innovation projects; selection of the R&D projects; and
definition of the form of acquisition (internal development vs. external
sourcing).

Technological project generation is both a strategy pull and technology push
process, the result of two processes. On the one hand, projects can be generated
under the pressure of the strategic analysis that has indicated that a certain
technology to be relevant to support the firm's
strategy. Technical personnel submitting their project proposals can also
generate technology projects.

For each technological project (investment or R&D), a short form should be
completed, giving:

project objectives,

relevance,

impact if successful (quantity if possible),

cost (estimate of human resources and other costs, and

deadline.

Table 5 shows the technology projects (investment projects and R&D projects),
the related critical technology, and the costs and benefits for each projects.

TABLE 5. Critical technologies, R&D projects, costs and benefits

Critical
technologies

R&D
projects

Costs*

Benefits*

* Total cost of the project, including materials,
infrastructure, personnel, and R&D contracts

** Expected benefits for next five years,
considering increase of sales (present sales minus future sales)

At this stage, selection of R&D projects may be necessary, since the funds
available may be less than those required for the whole set of projects
generated.

Benefits and costs should not be limited to financial aspects but should include
subjective and non-quantitative factors:

probability of technical success: chance of technical success estimated by
the technical personnel

probability of commercial success: chance of commercial success estimated by
the marketing personnel

return for the firm, considering the cost of the project: estimated
financial revenue dividend by project cost. This criterion includes the
duration of the advantage generated by the project (if successful)

strategic fit: level of consistency with the overall firm's strategy
estimated by the board of directors or strategic planning group (if there is
one)

consistency with core technologies: importance of the project in
strengthening the firm's capabilities in the CTs.

extent to which the technology can be patented: an R&D project becomes more
attractive when the results can be protected by a patent

consistency with technological threats and opportunities: extent to which
the project responds to a particular threat or opportunity.

By assigning a weight to each criterion, a merit table for each project can be
constructed (as shown by Table 6), evaluating each project against each
criterion, and multiplying weights by scores. Projects are thus prioritized
according to the merit table obtained.

The projects are undertaken until the budget is used up, starting from the top
of the list. At this stage, the portfolio obtained is revised to check the
balance against parameters such as risk, reward and time horizon. This procedure
ensures a balanced portfolio as regards a certain variable. For example,
projects are all highly promising but very risky or long term.

If the portfolio is not satisfactory i.e. unbalanced in certain parameters,
projects are redefined and the process repeated. Redefinition of a project means
that for example two projects might be combined and the objectives modified
slightly to exploit the synergies and common areas of the projects.
Alternatively, a project may be assigned a larger amount of funding to reduce
the time to completion, and so on. The final project portfolio definition is the
result of this iterative process.

TABLE 6. R&D project selection matrix

Criteria for selection

Weight

Projects

A

B

C

D

E

F

G

H

probability of technical success

probability of commercial success

return on investment

strategic fit

consistency with core competencies

extent to which the technology can be patented

consistency with technological threats and opportunities

High - 5 and Low - 1 with the
exception of criterion number 3. In this case, the actual values would be more
adequate when available. The weight reflects the relevance of the criterion.

When investment projects are evaluated, the same criteria can be used but the
weights will be different. Emphasis is given to benefit and cost factors.
Probability of technical and commercial success tends to have lower importance.

At this stage, once the technological project priorities are defined, the
implementation strategy for each should be defined. These guidelines deal mainly
with identification of technology needs, but some comments regarding the
strategies for project implementation are useful.

For R&D&E projects, this essentiality means deciding whether to develop
internally or resort to external sources. There are various ways of acquiring
technology from external sources. Pros and cons should be evaluated.

internal ventures, i.e. creating internal groups separated from the rest of
the organization: these will be devoted to development of new businesses
based on technologies available,

joint ventures or other forms of alliances, and

hiring human resources with the required capability.

The variables usually considered for choosing a certain mode of acquisition are:

availability of external sources (indicated in the competitive impact
analysis for each technology)

availability of the technology for acquisition at a price that allows
adequate return for the company.

demands and restrictions imposed by the licenser,

time-frame demanded by the company strategy: forms of technology acquisition
such as firm acquisition or licensing clearly allow certain technology to be
acquired very quickly,

appropriability (i.e. extent to which a certain technological knowledge
needs to e kept proprietary and made difficult to imitate): where there are
strong appropriability problems, internal development is safer that
resorting to external sources.

degree of familiarity of the firm holding the technology: a low familiarity
with technological competences required to develop a certain technology
forces acquisition from external sources, and degree of familiarity of the
firm with the market (if the investment into a new technology implies new
product line creation): again, a low familiarity with the activities
suggests going external.

Table 7 shows the results of the R&D&E selection process, including the
technology sources for each case.